The family office charter: what your tax preparer needs from it

Families that create an office or a formal management structure often start with a charter: a document stating the office's purpose, who it serves, who makes decisions, and how it is overseen. Drafting a charter is counsel's and the family's work. But a charter also answers questions every tax preparer needs answered, often in places the preparer never sees. Who is the employer? Which entity pays for what? Who signs returns and authorizes payments? Who can talk to the IRS? If the charter and the tax records disagree, the tax records are what the IRS reads.

This post covers what a preparer needs from a family office charter, or from any written description of how a household's finances are run. It is not a drafting guide and it does not tell a family what its charter should say. It lists the tax facts a charter should make clear, so the people preparing returns can work from the same page.

Seven questions a preparer needs answered

1. Which entity is the office?

Name the legal entity, its EIN, its state of formation, its tax classification (partnership, S corporation, C corporation, or disregarded entity), and its owners. If the "office" is informal and staff are paid by one family member or one business, say that. Many charters describe an office that has no legal existence, while the real employer is someone else.

2. Whom does it serve, and how is it paid?

List the family members, trusts, and entities that receive services. Then say how costs are allocated. A cost allocation method in writing supports the deduction position for each entity that pays, and it matters because individuals cannot deduct investment management expenses under Section 212 for 2026 and later. Costs allocated to an operating business, rental activity, or trust may be deductible there. Costs allocated to individuals generally are not.

3. Is it carrying on a trade or business?

If the family intends the office to be a trade or business for tax purposes, the charter is one of the documents that will be read to test that. The Tax Court in Lender Management, LLC v. Commissioner, T.C. Memo. 2017-246, looked at ownership, compensation through a profits interest, the services provided, and whether the office acted like a professional manager for clients with different interests. Language in the charter should match how the office actually operates. Designing that position is tax counsel's job. The preparer needs a copy.

4. Who employs the staff?

The employer of record files payroll returns, issues W-2s, and is liable for employment taxes. If office staff also do household work, such as managing a residence, the charter should say which employer pays for which work. Household employees of a family member are reported on Schedule H by that family member, not by an office entity, unless the office actually employs them and treats them as its own employees.

5. Who signs and who can see?

List who signs each entity's returns, who can authorize tax payments, and who holds Forms 2848 (Power of Attorney) or 8821 (Tax Information Authorization). Preparers also need written consent under IRC Section 7216 before sharing one client's return information with others, so the charter should name which advisors are expected to share information and get those consents signed.

6. Where do the records live?

Say where originals are kept, who has access, how long records are retained, and how documents are sent to outside preparers. A secure, encrypted channel is consistent with IRS Publication 4557. The general rule is to keep returns and supporting records at least three years after filing, longer for basis records (until the asset is sold, plus the limitations period) and for employment tax records (at least four years).

7. What happens when someone leaves?

Staff changes are when access, passwords, and knowledge get lost. The charter should name who takes over each signing and authorization role, and require that IRS and state online account access, EFTPS enrollment, and payroll provider access be transferred and old authorizations revoked.

Benefits and perks the charter should mention

Offices often provide benefits to staff and services to family members. Both have tax consequences that a charter can help clarify. Staff benefits such as health coverage, retirement plans, and parking have their own rules and limits. For 2026, the qualified parking and transit exclusions are $340 a month each, and 401(k) deferrals are limited to $24,500. Services provided by office staff to family members, such as personal bill paying, travel booking, or managing a residence, are generally personal expenses of the family member. If an office entity pays for those services and the family member does not reimburse it, the cost may be a distribution, a gift between family members, or compensation, depending on who owns the office and why. The charter should say how personal services are charged back, and the books should show the charge.

Use of office property, such as a car, an aircraft, or a residence owned by an entity, needs the same treatment. Personal use by an owner or employee is generally a taxable fringe benefit or a distribution. The valuation rules for personal use of aircraft and vehicles are detailed, and the records needed are use logs kept at the time of use.

Items a charter should not try to settle

A charter states intent. It does not decide tax classification, whether a payment is deductible, or whether a worker is an employee. Those are decided by facts and law. A charter that says "the office provides professional management services" does not make the office a trade or business if, in practice, it manages only its owners' money. Keep the language descriptive and accurate.

A one-page tax summary to attach

Whether or not a family has a formal charter, a one-page tax summary helps every advisor. It lists:

• Every entity, with EIN, classification, owners, and preparer.
• The employer of record for each staff member.
• The cost allocation method.
• Signers and authorizations.
• Where records live.
• Annual filing calendar, including 2027 dates for 2026 returns: March 15 for partnerships and S corporations, April 15 for individuals, trusts, and gift tax returns.

The scored diagnostic

Score each item 0, 1, or 2. Zero means missing. One means partial or out of date. Two means current and documented.

Item	0, 1, or 2
The office entity is named with EIN and tax classification
Persons and entities served are listed
A written cost allocation method exists and is followed
Trade or business position, if any, reviewed by tax counsel
Employer of record for each staff member is clear
Signers and authorizations are listed and current
Section 7216 consents are signed for expected information sharing
Record location, retention, and transfer method are written
Succession for signing roles and system access is written

A total of 15 to 18 means the charter supports the returns. A total of 9 to 14 means the charter and the tax records need reconciling. Below 9, the preparer is working from assumptions.

Illustrative: a charter that names the wrong employer

Illustrative: A family's charter says its management LLC employs a controller and an assistant. In practice, the controller is paid through one family member's operating company, and the assistant is paid by the parents personally and spends half her time managing their homes.

The preparer sees three employers, not one. The operating company is deducting the controller's wages for work done mostly for the family, which may not be ordinary and necessary for that business. The parents should be filing Schedule H for the household portion of the assistant's work, or the arrangement should be restructured. The management LLC itself has no payroll and no employees, despite the charter. Counsel decides how to fix the structure. The preparer needs the facts to match the filings.

A charter is worth rereading each year alongside the tax returns. If the two describe different arrangements, decide which one reflects reality and fix the other.

Who owns what

The family and counsel draft the charter. Tax counsel reviews any trade or business position. The preparer reads it for the seven questions above and flags conflicts with the filings.

Next step: send your preparer the charter, or a one-page description of how your finances are run, and ask whether it matches the returns.

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Educational only. This is not tax or legal advice for your situation. Consult your own CPA, EA, or attorney before acting.